Chapter 3 Quiz

Which of the following statements best supports the fact that even during a period of low demand in the U.S. automotive industry, excess capacity remained? Suppliers in the automotive industry had low bargaining power. Other American automakers of plug-in hybrid sports cars, like Fisker Automotive, filed for bankruptcy. Complementary products and services like battery charging and service stations were pervasive. GM and Chrysler, despite their bankruptcy, restructured instead of exiting the industry.

GM and Chrysler, despite their bankruptcy, restructured instead of exiting the industry.

Genie Software Inc. has been operating in the country of Jamtland for almost a decade. The nation is currently experiencing an economic downturn. Which of the following is the most likely benefit of this economic condition for Genie Software Inc.? Genie will have better access to highly skilled human capital at a lower cost. Genie will have to expand its operations to meet the increasing consumer demand. Genie will experience less competition from rival companies. Genie will find it easier to raise prices to increase profits.

Genie will have better access to highly skilled human capital at a lower cost.

Which of the following real-world examples best supports the statement that strategic commitments to a specific industry may be the result of political rather than economic considerations? A number of European governments created Airbus through direct subsidies to provide a countervailing power to Boeing. Airbus and Boeing are likely to exit the aircraft manufacturing industry when industry profit potential falls to zero. The traditional U.S. airlines Delta, United, and American Airlines have large fixed costs to maintain their network of routes that affords global coverage, frequently in conjunction with foreign partner airlines. Given their strategic commitments, neither Delta nor United is likely to merge with other airlines.

A number of European governments created Airbus through direct subsidies to provide a countervailing power to Boeing.

Which of the following is a feature of a fragmented industry? It tends to generate high profitability. It consists of many small firms. It allows firms to set prices. One large firm dominates the industry.

It consists of many small firms.

Which of the following statements is true of an oligopoly? Price-competition is the preferred mode of competition. It is often analyzed using game theory. Competing firms are most often independent of one another. It is characterized by low entry barriers.

It is often analyzed using game theory.

Which of the following statements about the five forces in the U.S. airline industry is true? Substitutes are not readily available since customers cannot use other means of transport. The competitive forces taken together are quite unfavorable for generating a profit potential in the airline industry. The combination of the competitive forces leads to collusion among existing airlines. Entry barriers in the airline industry are relatively high because of the high costs involved.

The competitive forces taken together are quite unfavorable for generating a profit potential in the airline industry.

Incumbent firms can benefit from several important sources of entry barriers. Economies of scale are one such source. Which of the following is an implication of economies of scale for incumbent firms? They cannot employ technology efficiently. They can spread fixed costs over lesser units. They benefit from a less specialized division of labor. They can demand better terms from their suppliers.

They can demand better terms from their suppliers.

How do complements affect a primary product or service? They reduce the value of the primary product. They act as the strategic equivalent of the primary product. They increase the demand for the primary product. They lower the utility of the primary product.

They increase the demand for the primary product.

Which of the following firms most likely has the lowest bargaining power as a buyer? an automobile company that can backwardly integrate to produce its own component parts a fast food chain that has multiple suppliers for processed meat a government agency that buys large quantities of cement from a private supplier a cell phone company that requires highly customized software for its phones

a cell phone company that requires highly customized software for its phones

Generally speaking, which of these situations is likely to lead to greater profits? an industry that is about to undergo deregulation a situation that encourages operating at excess capacity a fragmented industry rather than a consolidated one an industry with fewer but larger competitors

an industry with fewer but larger competitors

Strategic group mapping establishes that competitive pressures within an industry are similar among all strategic groups. competitive rivalry is strongest between firms that are within the same strategic group. product features and prices are irrelevant to a strategic group. rivals inside a strategic group serve different customers.

competitive rivalry is strongest between firms that are within the same strategic group.

Which of these is a way to reconfigure a value chain? thinking about new combinations of resources and capabilities that a firm already possesses, such as repurposing a movie theater as a location for off-site corporate meetings creating a partnership through strategic alliances, such as a bakery partnering with a restaurant preparing to leave an industry rather than supply unreliable or substandard products to customers entering an industry by offering sporting events on streaming video when competitors are offering them through cable hookups

entering an industry by offering sporting events on streaming video when competitors are offering them through cable hookups

Qwik Process Inc. is a company that supplies microprocessors to Nuevono Inc., a computer hardware company. When Nuevono Inc. demands lower prices for the microprocessors, Qwik Process Inc. makes it clear that it would profit more from launching its own brand of laptops and desktops in the market. Fearing the competition it would then face from Qwik Process Inc., Nuevono Inc. decides to buy the microprocessors at the quoted price itself. In this scenario, Qwik Process Inc., as a supplier, has exercised its bargaining power by threatening to forward integrate. crowdsource. outsource. backward integrate.

forward integrate.

The relative bargaining power of suppliers is most likely low when the suppliers provide products that are differentiated. incumbent firms face low switching costs when changing suppliers. there are no readily available substitutes for the products and services they offer. the suppliers' industry is more concentrated than the industry it sells to.

incumbent firms face low switching costs when changing suppliers.

EZ Electronics Inc., Neo Digital Inc., and Techno Products Corp. are all companies that manufacture and sell consumer electronics. They procure their component parts from a similar set of suppliers in China and sell the final product to customers with similar needs. Thus, the three companies together are a part of a(n) plant. focus group. industry. occupational group.

industry.

The amount that savers are paid for use of their money and the amount that borrowers pay for that use is best described as a(n) interest rate. service tax. royalty fee. surcharge.

interest rate.

In the restaurant industry, a large number of restaurants cater to similar customer needs. However, each restaurant makes its product unique by offering a different cuisine, a different ambience, organic ingredients, or different services like home delivery. This differentiation allows each restaurant to set its own prices. Thus, the restaurant industry best illustrates a(n) perfectly competitive structure. monopolistically competitive structure. monogopoly. oligopoly.

monopolistically competitive structure.

Owners of coffee plantations in the country of Jabatina grow their own coffee beans and supply them to various stores and restaurants all over the country. There are many plantation owners supplying to a huge number of companies, and they are typically unable to differentiate their products from one another. They also do not have the power to fix their own prices in the industry. In addition, these suppliers can only achieve competitive parity and not a competitive advantage. Thus, the coffee bean industry in Jabatina best illustrates a(n)___ structure. monopolistically competitive oligopolistic monopolistic perfectly competitive

perfectly competitive

Restrictions imposed by the government, such as export quotas on certain products, are a part of the _______ environment of the PESTEL framework. economic sociocultural ecological political

political

A consolidated industry turns into a fragmented industry when restrictive government policies are introduced in the industry. firms reduce competition within the industry through mergers and acquisitions. technological advances lead to industry convergence. network effects enjoyed by incumbent firms within the industry become stronger.

restrictive government policies are introduced in the industry.